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A financial services expert has mooted the setting up of a fund with support of the IMF, the World Bank and other lending agencies to buy back Sri Lanka’s sovereign bonds and reduce the total outstanding debt.
As an example, he cited investing $ 5.5 billion to retire or own $ 10 billion of debt at a vast discount.
“This,” says Mangala Boyagoda, “will enable the Government to reduce the foreign debt and consequently improve debt-to-GDP ratio of 82% and thereby increase future borrowing capacity.”
His suggestions are following global financial markets, both debt and equity, suffering heavy losses due to the new coronavirus (COVID-19) global pandemic and uncertainty over the near-term economic trajectory of countries.
“Emerging markets took a heavy toll with EM bond funds exiting from Non-Investment Grade debt, which has exerted significant pressure on EM bond prices and liquidity,” said Boyagoda who is a veteran banker.
Consequently, EM sovereign bond yields rose significantly due to panic selling by investors of EM sovereign bonds.
As a result, says Boyagoda, the Sri Lanka International Sovereign Bonds (ISBs) with 2030 and 2029 maturities with a par value of $ 100 were trading at $ 55, reflecting an unprecedented yield to maturity of 18%.
He said Sri Lanka sovereign bonds trading at $ 55 offered an opportunity to buy back these bonds at nearly half the price. The total outstanding stock of SL ISBs is around $ 15.05 billion at present. ISBs represent the largest proportion of Sri Lanka accounting for around 45% of GOSL total foreign debt, added Boyagod
As an example, he cited investing $ 5.5 billion to retire or own $ 10 billion of debt at a vast discount.
“This,” says Mangala Boyagoda, “will enable the Government to reduce the foreign debt and consequently improve debt-to-GDP ratio of 82% and thereby increase future borrowing capacity.”
His suggestions are following global financial markets, both debt and equity, suffering heavy losses due to the new coronavirus (COVID-19) global pandemic and uncertainty over the near-term economic trajectory of countries.
“Emerging markets took a heavy toll with EM bond funds exiting from Non-Investment Grade debt, which has exerted significant pressure on EM bond prices and liquidity,” said Boyagoda who is a veteran banker.
Consequently, EM sovereign bond yields rose significantly due to panic selling by investors of EM sovereign bonds.
As a result, says Boyagoda, the Sri Lanka International Sovereign Bonds (ISBs) with 2030 and 2029 maturities with a par value of $ 100 were trading at $ 55, reflecting an unprecedented yield to maturity of 18%.
He said Sri Lanka sovereign bonds trading at $ 55 offered an opportunity to buy back these bonds at nearly half the price. The total outstanding stock of SL ISBs is around $ 15.05 billion at present. ISBs represent the largest proportion of Sri Lanka accounting for around 45% of GOSL total foreign debt, added Boyagod
